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Tuesday, October 6, 2009

I didn't sleep well last night. We received a couple of annoying phone calls that woke me up at around 3:30 am, and again at 5:30 am. My caller ID tells me that the caller's phone number is 408-651-8179, and it is identified as either "TOWER SOFT", "OUT OF AREA" OR "UNAVAILABLE". Searching the web, it seems like I am not the only person whose sleep was disturbed last night. See Caller Complaints, 800 Notes, and Who Calls Me? I found dozens of complaints from last night alone on these websites.

Like me, many of the recipients of these phone calls are on the Do-Not-Call Registry. In most cases the phone rings two or three times, but there is nobody on the other end when they answer. A phone call like that would be frustrating during the daytime, but it is highly abusive when they call and wake you up. What can you do about these types of annoying phone calls?

Monday, October 5, 2009

Can a bank reduce the interest rate of an established certificate of deposit (CD) account? I learned the hard way that the answer is YES. Let me be clear that I am not talking about a bank changing the interest rate at the CD maturity date, but actually lowering the rate during the original term of the CD. This happened to me, and it turns out to be all perfectly legal and approved by the FDIC.

Readers of my blog may remember that I wrote about receiving a free HDTV for opening a CD account at Irwin Union Bank. I deposited $20,000 into an 11-month CD with an interest rate of 1.96% in July. Then on September 18th, Irwin Union Bank was closed by the FDIC with its accounts and assets transferred to First Financial Bank. Subsequent to the Irwin Union Bank closing, the acquiring bank (First Financial) sent me a letter saying that my interest rate had been reduced to 1.5% for the remainder of my CD's term.

Does that seem right to you? On the FDIC webpage about the failed bank (Irwin Union Bank), there is a long-winded document called a Purchase and Assumption Agreement. Reading through the FDIC gobbledygook, I came upon this paragraph explaining how the assuming bank (First Financial) may change the interest rate on its CD acquired from Irwin Union Bank:

2.2 Interest on Deposit Liabilities. The Assuming Bank agrees that, from and after Bank Closing, it will accrue and pay interest on Deposit liabilities assumed pursuant to Section 2.1 at a rate(s) it shall determine; provided, that for non-transaction Deposit liabilities such rate(s) shall not be less than the lowest rate offered by the Assuming Bank to its depositors for non-transaction deposit accounts. The Assuming Bank shall permit each depositor to withdraw, without penalty for early withdrawal, all or any portion of such depositor's Deposit, whether or not the Assuming Bank elects to pay interest in accordance with any deposit agreement formerly existing between the Failed Bank and such depositor; and further provided, that if such Deposit has been pledged to secure an obligation of the depositor or other party, any withdrawal thereof shall be subject to the terms of the agreement governing such pledge. The Assuming Bank shall give notice to such depositors as provided in Section 5.3 of the rate(s) of interest which it has determined to pay and of such withdrawal rights.

I was following along up until the phrase "and further provided"... In any case, the net result of all this is that although I have not lost any principal or interest accrued before the failure of Irwin Union, the future interest rate has been reduced. The FDIC has also provided that a depositor could withdraw their funds without a penalty for early withdrawal. From my previous post, I mentioned that for the free TV offer, "The penalty for early withdrawal is substantial -- $500 plus 91 days of interest. That works out to about $600 if you need get your money out early."

I called my new bank, First Financial, to quiz them on this issue. They confirmed that my CD interest rate has been reduced, and that there would be no further reduction of the interest rate for the remainder of the term. And, I could withdraw my money anytime before maturity with no penalty. When I asked about the HDTV set, they said that there would be no penalty to keep that either.

So, what should I do? I could withdraw my money and keep the HDTV without penalty. That would work out to a pretty good equivalent interest rate. Or, I could keep my money in the CD account since 1.5% is still better than most money market or rates for a similar term CD nowadays.

Thursday, October 1, 2009

Here are the latest money market interest rates of the banks that I've been tracking on my blog. Note that these rates are sorted by APY, and represent institutions that I have accounts at, or have otherwise mentioned in my blog:

NOTES: *The PayPal Money Market fund is NOT FDIC insured.
Rates are believed to be accurate as of 10/1/09. I did not include banks that had special, or introductory rates in the list because they are not ongoing interest rates. I am also not including non-liquid accounts such as CD's in the list.

The SavingsLink account is no longer offered by Bank of America, and has been replaced by the Growth Money Market Saving account. Guaranty Bank has been closed by the FDIC, and was taken over by BBVA Compass. I will no longer be tracking these accounts here.

In my last update, I mentioned Irwin Union Bank which was offering a free 22" HD LCD TV or a Flip MinoHD Mini Camcorder to open a new bank account. Unfortunately, Irwin Union Bank has also been closed, and taken over by First Financial Bank.

So, there is the latest list. I intend to write a couple of follow up posts about the recent bank closing, and how changes may affect your accounts.